Bloomberg News

Samaras Clinches Confidence Vote as Euro Area Ministers Meet

July 09, 2012

Greece's Prime Minister Antonis Samaras

Antonis Samaras,Greece's prime minister. Photographer: Chris Ratcliffe/Bloomberg

Greek Prime Minister Antonis Samaras won a vote of confidence in his new government, setting the stage for a showdown with the European Union over easing the terms of its bailout.

Samaras received 179 votes in support, compared with 121 votes against, according to a tally in the Parliament in Athens early today. Samaras’s government is backed by the socialist Pasok and the Democratic Left parties, which gives him 179 seats in the 300-seat chamber.

“The only path to avoid the crisis and an exit from the euro is growth and investment,” Samaras said before the vote. “Europe acknowledges that along with fiscal adjustment there must be growth.”

The government will assess creditor countries’ appetite to ease Greek bailout terms today when Finance Minister Yannis Stournaras attends his first meeting of euro counterparts in Brussels. The coalition, formed after Samaras’s New Democracy party narrowly beat anti-bailout party Syriza in a June 17 election, is hoping to renegotiate some of the austerity measures in the second, 130 billion-euro ($160 billion) rescue package as the country suffers a fifth year of recession.

Minister Resigns

Samaras was tested anew today when Deputy Labor Minister Nikos Nikolopoulos, a member of the premier’s party, resigned, saying he believed that “significant distortions” in labor and pension issues needed to be immediately addressed in talks with the so-called troika of creditors from the European Union, International Monetary Fund and the European Central Bank. Nikolopoulos said he’ll continue to support the government as a lawmaker.

Concessions such as those may be hard to wring from some EU leaders, after the euro area and IMF pledged a total of 240 billion euros in aid for Greece, even as political instability in Athens, which led to two national elections in six weeks, sparked concern about the future of the 17-nation single currency.

Greece has some leeway to shift the composition of taxes and spending to meet its deficit-reduction targets without renegotiating the targets themselves, a European official told reporters in Brussels on July 6 on condition of anonymity.

Aid Tranche

A four-month policy making hiatus caused by the elections means Greece can’t count on the next tranche of its aid disbursement until it proves that the economic-overhaul strategy is back on track, the official said.

Decisions on the next Greek aid payment aren’t likely until August, the official said. Stournaras told lawmakers in his first address to parliament that budget measures for this year needed to be implemented, even if targets weren’t met due to the greater than forecast recession, or else Greece will risk the next loan payment from its creditors.

Samaras has pledged to put the nation’s economic reform plan back on track, promising to ramp up the pace of state-asset sales to boost investment and jobs and help finance an extension to the fiscal adjustment plan. The government yesterday completed the sale of four Airbus A340-300 aircraft, formerly used by the country’s state-run airline, for $40.4 million, the Finance Ministry said in an e-mailed statement.

Stocks Rise

Greek stocks rose today, buoyed by fresh assurances that the government will jump-start the state-asset sales plan. Opap SA (OPAP), Europe’s largest listed gambling company, gained 2.3 percent to 5.27 euros at 2:30 p.m. in Athens, while Public Power Corp (PPC) SA, the biggest electricity company, advanced 5.2 percent to 2.61 euros. The benchmark general index added 1.2 percent to 646.47.

“Each euro from the exploitation of state assets is one euro less needed from fiscal measures which would further weigh on the recession and the country’s social crisis,” Stournaras said. He said priority would be given to six assets including the country’s natural gas monopoly.

The government’s emphasis on state-asset sales led to a clash with Syriza, the second-biggest party in Parliament, which has said that negotiations with the troika are pointless. Leader Alexis Tsipras warned prospective investors buying Greek state assets that “they will lose their money.”

Samaras “spoke of a program that is missing its targets,” Tsipras said. “And what is the logical conclusion of that? Doesn’t the bailout going off course prove its complete failure?”

Opinion Poll

The first opinion poll since the June 17 election showed that while a majority of Greeks supported the coalition government, they were split on whether it should stick to implementing the terms of the bailout.

Of the 801 people surveyed, 57 percent said they supported the coalition, compared with 36 percent who said it’s a negative development, according to the Metron Analysis poll for Athens- based Ependytis newspaper.

Almost one in two, or 48 percent, said Greece should implement and work to improve terms agreed in return for the bailout funds. The same number said the bailout should be canceled as the policies have failed.

Unemployment in Greece has soared to a record amid a slump deepened by wage and pension cuts and tax increases. Gross domestic product contracted 6.5 percent in the first quarter from a year earlier. Pasok leader Evangelos Venizelos told troika officials on July 7 that a new plan was needed as forecasts for GDP this year were bound to be missed.

Bond Writedown

Venizelos, who negotiated the second bailout as finance minister earlier this year, said a writedown of Greek government bonds held by the ECB should be one of the steps to further ease the debt burden.

Greece’s debt can be cut by 12 percentage points if the ECB takes a “haircut” and by 25 percentage points with the transfer of 50 billion euros of bank recapitalization funds to the European Financial Stability Facility, Venizelos said in Parliament on July 7.

Concerns over Greece’s debt will continue to dissuade the inflow of private capital which is needed for growth, jobs and investments, Kathimerini newspaper said, citing Pacific Investment Management Co. Chief Executive Officer Mohamed El- Erian. Greece needs to further reduce its debt and markets continue to be concerned over a Greek euro exit, the newspaper reported.

Democratic Left leader Fotis Kouvelis said supporting the government was Greece’s best chance of staying in the euro and revamping its economy by negotiating with EU partners on some of the terms.

‘Negotiations’

“Some of those issues can be pursued now at the negotiating table, some at a second stage,” he said. “Negotiations won’t occur at one point in time, at one summit, or at the first visit of the troika. It will be a continuous and persistent process, with tough talks.”

Samaras’s government platform includes the closure or merger of dozens of state agencies and reducing bureaucracy and regulations to attract investment. The government vows to show determination to crack down on corruption and fraud that deprives the state of revenue.

“We don’t want to change the goals; we want to change those things that are obstacles to our goals,” Samaras said on July 6. “The recession has to end, not constantly be reinforced.”

To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net; Eleni Chrepa in Athens at echrepa@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net; James Hertling at jhertling@bloomberg.net


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